IMF recommends the use of sovereign wealth funds to revive the Middle East and North African economies 

The International Monetary Fund (IMF) has recommended the use of sovereign wealth funds to revive the economies of the Middle East and North Africa, as oil exporters in the region face losses of $226 billion from the coronavirus crisis, according to IMF estimates. Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said oil exporters needed to find new areas of growth amid the current downturn caused by plunging oil prices and the new coronavirus outbreak, during a virtual conference included in the digital version of Al Jazeera.   

The falls in Brent and Texas oil in recent days do not bode well for oil. For oil-exporting countries this means lower fiscal margins to organize their budgets and a limited capacity to boost economic growth. It also means a halt in plans to diversify their economy, which in recent years has been financed through oil revenues.   

Similarly, Azour has said that exporters must find new areas of growth in the current recession caused by falling oil prices and the outbreak of coronavirus. "Sovereign wealth funds can play a role; regional institutions can play a role” he said.  

The sovereign wealth funds of oil-rich governments such as Abu Dhabi, Kuwait, Saudi Arabia, and Qatar are among the world’s largest, but they could see their assets decline by $296 billion by the end of this year, the Institute of International Finance has estimated. "MENA oil exporters are likely to see a 4.2% real GDP contraction this year, down from a previous projection of 2.1% growth," the official said, calling for accelerated reforms to diversify regional economies.   

“There are a certain number of taboos that lived with us for some time, that oil exporting economies for example have to be pro-cyclical, this is something that we could break ... Or that instruments cannot be redirected, that sovereign wealth funds cannot be redirected to help the economy grow,” he said. 

Twelve countries in the region - Bahrain, Iran, Morocco, Saudi Arabia, the United Arab Emirates, Egypt, Tunisia, Kuwait, Libya, Mauritania, Sudan, and Iraq - have provided $64 billion in combined fiscal support in response to the pandemic.